Tipping the Scales: Pros and Cons of a No-Tipping Policy

The no-tipping policy movement started with a few small businesses, but industry leaders have been turning heads as they convert to the new system. The “hospitality included” model forgoes the tipping process in favor of increased menu prices, and guests are informed that gratuity has already been included in the total.

The results of this experiment have been mixed, from smashing success to generating losses. Based on what we’ve seen in the industry, here are the potential benefits and costs of a no-tipping policy.

PRO: Retain talent by closing the wage gap

In the restaurant industry, there is a different type of wage gap - between front-of-house and back-of-house workers. Because of New York tip-pooling laws, front-of-house workers make significantly more than their colleagues in the kitchen. Tips cannot be distributed to back-of-house workers, so although the restaurant’s success is contingent upon delicious meals prepared by cooks and chefs, their paychecks are often stagnant around minimum wage.

Restaurants that have implemented a gratuity-free policy have been able to raise wages for back-of-house workers, making it more appealing for them to stay rather than move on to new employment. Attracting and retaining talent is something that the industry is still struggling with. Turnover rates are higher than ever, so locking down knowledgeable and dependable staff is imperative. Down the road, a more enjoyable experience for employees will make them stick around longer, reducing time and energy spent on training new hires.

PRO: In-advance scheduling

By nature, tips are unreliable and vary by time, date, and shift. For example, working on a Tuesday afternoon in an upscale restaurant is dramatically different from working at the same place on a Saturday night. There is no ‘set’ amount of cash that must come in on one night, leaving tip-dependent staff to hope for a lucrative shift. Otherwise, FOH workers may have to pick up or drop extra shifts due to a change in their income.

Rather than frantically filling in holes in the schedule, owners and operators would be able to anticipate staff schedules weeks into the future. With consistent wages, employees will know exactly what to expect on their paychecks. This steadier form of income will allow them - and you - to think and plan further ahead.

PRO: Not just working ‘for the tips’

As the liaison between guests and the kitchen, wait staff members must manage customer feedback and complaints in addition to food service. Servers often endure harassment - verbal and otherwise - from guests and do not report it with the conception that they will receive a higher tip if they remain passive. An unsafe work environment will lead to higher burnout and turnover rates in staff members. (For more info on how to spot burnout in staff, click here.)

CON: Sticker shock

Getting rid of tipping could mean raising menu prices. This will most likely throw your guests off a bit, no matter how much you advertise the upcoming changes. For some, visually pricier menu items might be a deal breaker. They may feel like the value of their meal no longer warrants the new price tag, even if they are ultimately paying the same amount. Almost every restaurant that has made the switch has reported a dip in sales immediately after the change.

CON: Service doesn’t justify the charge

Because staff wages would be fixed, they may not be as motivated to provide the best service. They’re getting paid the same amount either way, so going that extra mile isn’t worth it for them in the short run.

By including gratuity, customers lose the power to decide how much or little to give. Some prefer to tip because they can choose the amount, whereas a gratuity-included model assumes that they pay a fixed percentage of the meal. Again, if the service that guests receive is not on par with the automatic service charge, they may opt for another dining spot.

Quick Tips for a No-Tips Policy:

Plan the switch: Make sure the restaurant and staff are ready for the change and anticipate possible shifts in revenue so that you can more readily respond to feedback once you make the transition.

Let everyone know what you’re up to: Have a level of transparency with guests as well as staff. Advertise the decision and alert customers to possible changes that may be coming to the menu. Post in on your restaurant’s website, broadcast it on social media, and put it up in the restaurant so that the transition won’t come as a surprise.

Assess where you can and cannot raise prices: Different menu items have different levels of elasticity when it comes to price changes. The price of a signature dish involving multiple elements, for example, will be easier to adjust than the price of a cup of coffee. Take a look at order patterns for certain dishes to see which ones are getting the best responses to the change.

Creatively adjust the menu: Elevated menu costs may decrease business, so think more about how to fully utilize resources to maximize revenue. Modify or add dishes to help customers adjust to the change in price; guests should feel like the cost of the dish matches the value of the meal they are receiving.

Have patience: Respond to customer and staff feedback, and know that it will definitely come whether you ask for it or not. Be prepared for initial dip in business; if sales continue to decline, it may make sense to go back to a system with tipping. Finally, If staff and guests are not as ready for the switch, wait before making a decision. Operations will run much more smoothly if everyone is on board!