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]

There's a good podcast on the subject in the link below. From actual "Experts" on the subject...

5 reasons we should ban tipping
The practice is confusing, inefficient and ultimately discriminatory, researchers say.

If you listen to the latest Freakonomics Radio podcast, you may never want to tip again. Host Stephen Dubner interviews one of the country's experts on tipping, Cornell University professor Michael Lynn, who has written 51 academic papers on the subject.

In the podcast, Lynn was asked what he would do differently if he could go back in time and rewrite the social norms related to tipping. What would he change?

He said he would outlaw tipping completely. That's a surprising response from someone who has basically devoted his career to studying the practice. Some restaurants already do this. Dubner mentions The Linkery in San Diego, which bans tipping in favor of an 18% service charge for diners.

From the experts in the podcast, here are five reasons the U.S. should ban tipping:

It's discriminatory. This is Lynn's No. 1 reason for outlawing tipping. In his research, he's found that the people who get the most tips are slender white women in their 30s with large breasts. What a surprise.

He's also found that minorities get fewer tips in general. When you have an aspect of employment that hurts a broad class of people, whether it's intentional or not, that's absolutely discriminatory. This is a class-action lawsuit just waiting to be filed.

It may lead to corruption. Another expert interviewed in the podcast, Magnus Torfason from Harvard Business School, said he has found that countries with more tipping have more corruption.

It's really uncomfortable. For the tipper, that is, and possibly for the tippee as well. That's because people don't know what they're supposed to tip and for what service. How much is enough? And do I have the right bill on me? I can't really ask this person to break a $20 bill, can I? Help!

It's essentially subsidizing businesses. Lynn has estimated that about $40 billion a year is given in tips in the United States. Dubner pointed out that NASA's annual budget is less than $20 billion. So we could build two NASAs with all the money being tipped. That's money that businesses don't have to pay to their waitresses and other service employees.

It shifts work away from the employee. Tipping can actually create so much unease that some customers end up doing the work instead of the employee. For example, people carry their own luggage to their hotel rooms even though there are workers hired to perform that specific service. People park their own cars farther away, even though there's a valet right there at the door. As a result, some service workers end up with nothing to do, which is inefficient and wastes a company's resources.

[kysirsoze]

Originally Posted by J Diddy

There's no mention of it going to the servers. It is nothing but a surcharge and is used to pool together the labor costs according to this article:

http://www.takepart.com/article/2013...ess-restaurant

Well I guess It'd depend on how the payment of the servers worked, but if they could pay servers somewhere close to what a comparable serving job would pay, I would take the consistency and fewer headaches in a heartbeat. I'd miss the occasional huge nights, but I certainly wouldn't miss the opposite nights where you end up with every tightwad in the place and have to eat ramen.

[aturnis]

Tipping is gay.

[Rain Man]

Originally Posted by Fish

[B][SIZE="3"]

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.

I thought the bolded part was pretty interesting. I'd never thought about that.

[Fish]

Originally Posted by J Diddy

There's no mention of it going to the servers. It is nothing but a surcharge and is used to pool together the labor costs according to this article:

http://www.takepart.com/article/2013...ess-restaurant

From that article:

the approach amounted to servers earning $22 per hour, cooks pulling in $12 to $14, and dishwashers making about $10.

Right now minimum wage for tipped workers is $2.13.

[kstater]

Originally Posted by Rain Man

I thought the bolded part was pretty interesting. I'd never thought about that.

And how does charging a mandatory 18% change that? If anything, it encourages it as they're guaranteed that percentage regardless of what they do.

[Rain Man]

Originally Posted by kysirsoze

Well I guess It'd depend on how the payment of the servers worked, but if they could pay servers somewhere close to what a comparable serving job would pay, I would take the consistency and fewer headaches in a heartbeat. I'd miss the occasional huge nights, but I certainly wouldn't miss the opposite nights where you end up with every tightwad in the place and have to eat ramen.

The interesting thing is that most people would immediately take consistency. If you offer a person a wage of $15 per hour or a wage of $10 per hour with tips that average $5 or even $6, a majority of people will take the $15. So why do we assume that restaurant workers would make the opposite choice? I think they do it because it's offered, not because it's a better system.

[BWillie]

Originally Posted by kysirsoze

Thanks for providing more evidence that this is a great idea.

I dont want a waiter at all. Im there for the food and for someone to clean the dishes so I dont have to. I like the system that Oklahoma Joes uses. You order, they have a counter, you get your food and sit down an eat it. Is having someone bring you your food and water so you dont have to ever lift your fat ass worth $15? It isnt to me.

[Rain Man]

Originally Posted by kstater

And how does charging a mandatory 18% change that? If anything, it encourages it as they're guaranteed that percentage regardless of what they do.

I think it does the opposite. It creates an incentive for a person to take fewer tables, not more, which means better service for the customer.

It's up to the restaurant manager to ensure that they're serving enough tables to be profitable, but that's a management issue and is best left in the hands of the manager rather than the server.

[kstater]

Originally Posted by Rain Man

The interesting thing is that most people would immediately take consistency. If you offer a person a wage of $15 per hour or a wage of $10 per hour with tips that average $5 or even $6, a majority of people will take the $15. So why do we assume that restaurant workers would make the opposite choice? I think they do it because it's offered, not because it's a better system.

How do you ensure consistency from a consumer stand point when the server doesn't bear a responsibility to?

[kstater]

Originally Posted by Rain Man

I think it does the opposite. It creates an incentive for a person to take fewer tables, not more, which means better service for the customer.

It's up to the restaurant manager to ensure that they're serving enough tables to be profitable, but that's a management issue and is best left in the hands of the manager rather than the server.

How so? The more people they move the more guaranteed tips they get

[Rain Man]

Originally Posted by kstater

How do you ensure consistency from a consumer stand point when the server doesn't bear a responsibility to?

The same way you do at a grocery store or a mechanic's shop or a dentist's office. Restaurant workers are the same species as other workers who don't take tips, so I don't understand why they have to be treated like Skinner's rats. Do they have no work ethic until the pellet rolls down the chute?

[Rain Man]

Originally Posted by kstater

How so? The more people they move the more guaranteed tips they get

Maybe I don't understand the system. Are they getting the 18% at the end of the night or are they being paid a standard livable hourly wage?

If it's the first, then I guess there's the same incentive to maximize tables and minimize service (or it's even worse), though I think that disassociating Table 14 with that $10 bill will help. If it's the second, the problem is solved.

[CrazyPhuD]

WTF....I bring $10 rolls of quarters so I can make it rain for my table server! What am I supposed to do now???

[Demonpenz]

I tip huge because I can. If someone is busting their ass I will give them what I can afford.