The tipping debate—whether restaurant owners should continue allowing guests to control gratuity or begin including a set service charge—may not be the sexiest conversation to have among average foodies. But it could soon affect your restaurant bill no matter where you’re dining.
Last month, Logan Square casual German joint The Radler got rid of the tip line on guest checks, instead adding an 18 percent service charge to each bill no matter the party size. Following that, New York restaurateur Danny Meyer announced in October that he was eliminating tipping at 13 of his upscale Union Square Hospitality Group restaurants by the end of next year (GreenRiver in Streeterville, however, will not be participating). Just last week, Joe’s Crab Shack announced that it’s getting rid of the tip at 18 of its 130 locations. Taking one from The Radler, CH Distillery in the West Loop will also remove the tip line in favor of an 18 percent service charge starting the first week of December.
These changes are hitting three major dining groups—casual chains, independent restaurants and upscale spots—which means we could all be seeing fewer tip lines if this trend continues. Here’s what you need to know about the tipping debate.
Why should you care?
As a consumer, or someone who enjoys eating out, you might see restaurants doing away with the tip line in favor of automatically adding a flat service charge to the bill or increasing menu prices. Depending on how much you usually tip, you could be paying more or less than usual.
According to a 2014 study by Chicago-based food consulting firm Technomic, 57 percent of U.S. diners tip more than 15 percent in full-service restaurants. Of that, 44 percent leave between 16 and 20 percent.
Ultimately, no-tipping policies could help you better budget when you go out, according to Tim Classen, an associate professor of economics at Loyola University’s Quinlan School of Business.
“On the diners’ side, it has the potential to give a clearer picture of what things are going to cost prior to making a choice,” said Classen, who enjoys high-end foodie destinations like Grant Achatz’s Next. “If I get a $20 entree and now it’s going to cost $26 with the service charge and tax built in, I have a better idea of what it’s going to cost me, which could have an effect on demand.”
Why is this happening?
Restaurants that make the change will be able to better pay cooks, dishwashers, hosts and those who can’t dip into the tip pool because of countless U.S. Department of Labor laws and regulations. Only restaurant workers, usually servers or bartenders, who are paid the tipped minimum wage (currently $5.45 in Chicago) are entitled to tips, according to U.S. Department of Labor laws.
Before added gratuity, servers at The Radler could take home between $900 and $1,500 in a 20- to 30-hour workweek during busier months, co-owner Adam Hebert said. During slower months, he said, it could be closer to $300 or $400. But other non-tipped staff members were working between 40 and 60 hours and only making $12 an hour at most. When he did the math, Hebert said the average guest tipped 22.7 percent, “a huge chunk of cash flow we have no control over.”
“We can’t use it to pay the dishwashers, hostesses—they’re not winning because we’re doing more sales,” he said.
With the new no-tipping policy, which requires patrons to pay a flat 18 percent gratuity fee, those servers can make an hourly wage between $22 and $30, based on experience, expertise and tenure, Hebert said. It doesn’t necessarily lower their average income but evens it out when business is slower, he said. Kitchen staff are now making $15 an hour, Hebert said, and might not feel as overworked with at least two new hires.
“In a three-week period of time, we’ve been able to [hire two cooks],” he said. “Even if it’s just those two people, that’s more applications than we have received in the last nine months actively looking for people.”
Why not just pay cooks more?
There’s no means to do it, Hebert said. “The money’s got to come from somewhere.”
Many restaurants operate on thin margins. Hebert explained that he sources produce and meats from local farmers who are also trying to make ends meet without pumping their animals with hormones or destroying fields and farmlands.
“We want to support that, [but] that limits us from being able to do a $1 hamburger,” he said. “That’s something we should be charging more for, but in order to stay competitive in the market and be able to offer these dishes at a low enough cost to get people to come in on a regular basis, it’s kind of a game—are we going to let our labor costs be high or our food costs be high?”
Hebert said finding a good cook staff was incredibly difficult, and it’s an issue restaurants often encounter because across the board, cook staff wages are low. According to the Department of Labor Statistics, there were more than 26,500 cooks in Chicago, Naperville and Joliet in 2014, and the average wage was $11.37.
“I think it’s always alarming how little chefs and cooks get paid,” Classen said. “It’s a little staggering to go and drop $200 on a meal and realize the people preparing it are not really making all that much money from you.”
But giving restaurants more control over gratuity could offset the disparity between tipped and non-tipped minimum wage staff.
Will this affect service, and what if I’m not satisfied with my service?
Classen predicts there might be positive effects on service: “It could improve the relationship [between servers and patrons] because their behavior isn’t motivated by getting a higher tip,” he said. “It could increase their credibility with the diners.”
Hebert said the change has impacted his staff for the better. Even if it’s a slow Tuesday, when a server may not make as much based on gratuity, his staff comes to work and wants to be there. He said his employees are more eager to learn because the hourly wage provides opportunities for raises.
If service isn’t great, just say so. A low tip could mean the guest doesn’t understand the tipping culture, is generally a stingy tipper or was unhappy with the service—it’s hard for management to tell. With the predetermined tip, guests can tell a manager if they weren’t satisfied with the service to negotiate gratuity, Hebert said, adding that he’s encountered this about three times since the shift.
“So now rather than going on Yelp and saying, … ‘The service was terrible, food was great,’ and getting angry after they leave, they bring it up to us here, which is huge,” he said.
When it comes to leaving additional money on the table, coat check or bar for exceptional service, Meyer’s announcement told guests that wasn’t necessary. If it happens at The Radler, Hebert said the cash goes straight into a fund for a staff party, which the staff all agreed upon.
What are the downsides?
Most diners are used to controlling gratuity, and it’s possible that the no-tipping trend could cause some confusion or negative feelings at first—especially if restaurants decide to drive up menu prices rather than add a gratuity fee.
“If it looks like a restaurant has increased prices by 20 percent on their face, then that could affect people’s willingness to go out to eat initially,” Classen said. “Presumably, we would learn over time that without the tip, my costs are the same.”
The 18 percent service charge worked best for Hebert because increasing menu prices at The Radler could deter patrons more than it might at high-end restaurants like Meyer’s, whose demographic is already expecting to pay more, he said.
Some fine dining restaurants in Chicago, such as Alinea and Next, already include a service charge with the bill. However, Michelin-starred Moto in Fulton Market, which for 10 years included gratuity on its fixed price menu, switched to giving guests the option to tip about two months ago, according to general manager and wine director Bobby Gilbert. He said he didn’t think the no-choice gratuity was fair to the guests or to the servers, who aren’t being rewarded for the higher level of service being required of them at a fine dining establishment.
He said to make up for the loss, the fixed price menu (ranging from $135 to $185 for nine to 18 courses) increased $10 to cover kitchen staff costs, which may not be as noticeable at a fine dining restaurant.
“The restaurant industry is not the same beast across the board,” Gilbert said. “Moto compared to our neighbor [casual Brazilian restaurant] La Sirena [Clandestina] are two different entities. … If you’re across the street, raising an entree $5 could be huge, but raising my menu $10 might not even be noticed.”
Gilbert also said he no longer has to worry about added gratuity on alcohol and pricey bottles of wine, which can significantly impact the bill. Many patrons don’t tip a full 20 percent on alcohol, according to Classen, but a service charge in that case would increase revenue for the restaurant.
“If you buy a $200 bottle of wine and then there’s a 20 percent service charge on that, you’re paying $40 for the service charge,” he said.
CH Distillery co-founder and head distiller Tremaine Atkinson said the service fee will not apply to bottle sales in the restaurant, however. Overall, he thinks Chicago diners will be seeing a lot more no-tipping policies. “It makes a lot of sense,” he said. “It’s the right way to run the business, and it’s the right way to treat and pay our staff correctly, which ultimately means a better dining experience.”
Whether or not eliminating the tip line gains traction, restaurants are making moves to offset labor costs. Gilbert isn’t 100 percent sure what the best solution is but explained that his focus is on what’s best for his employees. “The only thing I know is right is paying your staff a living wage,” he said.
Additional reporting by Eat & Drink editor Morgan Olsen. For more eat & drink news, click here.
