Restaurant bans tipping. Guess what happened?

[Fish]

After I banned tipping at my restaurant, the service got better and we made more money

Tipping, as a compensation scheme, is great for everyone.

Restaurant customers like tipping because it puts them in the driver’s seat. As a diner, you control your experience, using the power of your tip to make sure your server works hard for you.

Restaurant servers like tipping because it means their talent is rewarded. As a great server, you get paid more than your peers, because you are a better worker.

Restaurant owners like tipping because it means they don’t have to pay for managers to closely supervise their servers. With customers using tips to enforce good service, owners can be confident that servers will do their best work.

There’s only one problem: none of this is actually true. I know because I ran the experiment myself.

For over eight years, I was the owner and operator of San Diego’s farm-to-table restaurant The Linkery, until we closed it this summer to move to San Francisco. At first, we ran the Linkery like every other restaurant in America, letting tips provide compensation and motivation for our team. In our second year, however, we tired of the tip system, and we eliminated tipping from our restaurant. We instead applied a straight 18% service charge to all dining-in checks, and refused to accept any further payment. We became the first and, for years, the only table-service restaurant in America where you couldn’t pay more money than the amount we charged you.

You can guess what happened. Our service improved, our revenue went up, and both our business and our employees made more money. Here’s why:

• Researchers have found (pdf) that customers don’t actually vary their tips much according to service. Instead they tip mostly the same every time, according to their personal habits.
  
  
• Tipped servers, in turn, learn that service quality isn’t particularly important to their revenue. Instead they are rewarded for maximizing the number of guests they serve, even though that degrades service quality.
  
  
• Furthermore, servers in tipping environments learn to profile guests (pdf), and attend mainly to those who fit the stereotypes of good tippers. This may increase the server’s earnings, while creating negative experiences for the many restaurant customers who are women, ethnic minorities, elderly or from foreign countries.
  
  
• On the occasions when a server is punished for poor service by a customer withholding a standard tip, the server can keep that information to himself. While the customer thinks she is sending a message, that message never makes it to a manager, and the problem is never addressed.
  
  
• You can see that tipping promotes and facilitates bad service. It gives servers the choice between doing their best work and making the most money. While most servers choose to do their best work, making them choose one or the other is bad business.

By removing tipping from the Linkery, we aligned ourselves with every other business model in America. Servers and management could work together toward one goal: giving all of our guests the best possible experience. When we did it well, we all made more money. As you can imagine, it was easy for us to find people who wanted to work in this environment, with clear goals and rewards for succeeding as a team.

Maybe it wouldn’t work in every restaurant, in every city. Maybe the fact that it worked so well for us was due to some unique set of circumstances. Then again, other service industries like health care and law aren’t exactly lining up to adopt tips as their primary method of compensation. So maybe we’re all just being suckered into believing tipping works.

It’s something you can think about, at least, the next time you’re waiting on a refill of iced tea.

[Fish]

Upscale NYC sushi place does the same thing: http://abcnews.go.com/blogs/headline...ant-bans-tips/

[jd1020]

Amy's Baking Co.?

[Stanley Nickels]

Originally Posted by Fish

Upscale NYC sushi place does the same thing: http://abcnews.go.com/blogs/headline...ant-bans-tips/

The wife and I ate there in April '09. That is, bar none, the best sushi I have EVER had. Everything was classy as ****, too.

[Pasta Little Brioni]

Mr. Pink approves

[BlackHelicopters]

Good news!

[Rain Man]

I would eat at this place every day.

[Loneiguana]

I agree with the approach this guy is taking, but wish he would actually factor the tips into his prices instead of mandatory tip, which is kinda what he did.

[Fish]

Originally Posted by Loneiguana

I agree with the approach this guy is taking, but wish he would actually factor the tips into his prices instead of mandatory tip, which is kinda what he did.

What difference would it make? Currently, it's a percentage of the total bill at the discretion of the customer. Now it's a fixed percentage of the total bill every time. It's simply shifting the responsibility of of the same amount a customer would (hopefully) be tipping, to the store. As long as the employer isn't a dick and pays an actual fair amount everybody wins. That's the way every other business is run. If the employer abuses it, they won't have employees any longer.

[kstater]

Originally Posted by Fish

What difference would it make? Currently, it's a percentage of the total bill at the discretion of the customer. Now it's a fixed percentage of the total bill every time. It's simply shifting the responsibility of of the same amount a customer would (hopefully) be tipping, to the store. As long as the employer isn't a dick and pays an actual fair amount everybody wins. That's the way every other business is run. If the employer abuses it, they won't have employees any longer.

Or a business(see closing the store down)

[ShortRoundChief]

I'm not sure how that's banning tipping. Seems to me it's a way for the company to get a cut of the tips.

[DaFace]

Originally Posted by J Diddy

I'm not sure how that's banning tipping. Seems to me it's a way for the company to get a cut of the tips.

While true, it would be tough to present it that way. Why would anyone go there instead of to a competitor if all of their "prices were so much higher"?

If the entire world transitioned away from tipping, then I agree - build it into the price. For now, I understand why they handled it like they did.

[Fish]

Originally Posted by DaFace

While true, it would be tough to present it that way. Why would anyone go there instead of to a competitor if all of their "prices were so much higher"?

If the entire world transitioned away from tipping, then I agree - build it into the price. For now, I understand why they handled it like they did.

People anticipate tipping already. Or at least should.

They could go to Restaurant A and expect to pay $8 + $2 tip.

They could go to Restaurant B and expect to pay $10.

Both situations, the waiter ideally should receive the same.

[ShortRoundChief]

Originally Posted by DaFace

While true, it would be tough to present it that way. Why would anyone go there instead of to a competitor if all of their "prices were so much higher"?

If the entire world transitioned away from tipping, then I agree - build it into the price. For now, I understand why they handled it like they did.

I said nothing of the prices being higher. I said it's their way of getting their cut, which every bit of evidence leads to.

[notorious]

Originally Posted by J Diddy

I'm not sure how that's banning tipping. Seems to me it's a way for the company to get a cut of the tips.

Bingo