A waffle restaurant made headlines earlier this summer when it allegedly denied a waitress a $1,000 tip left by a generous patron. Tipping restaurant staff isn’t customary in parts of Asia and Europe, but it’s ingrained in the culture (and pay structure) at most restaurants and cafés across North America.
That could be changing as restaurants in New York, Los Angeles and even British Columbia experiment with nixing gratuities. Instead of having the customer leave a tip, these restaurants price food higher to cover a higher hourly rate for their employees.
Could this new pricing model have legs? Here’s a look at the pros and cons.
- When establishments serve lots of visitors from parts of the world where tipping 20 percent is less customary (say, India or Great Britain), their servers sometimes suffer low or no tips. Some establishments counter this by automatically charging a 20 percent tip instead of making the tip optional. Switching to a no-gratuity model gives patrons from other parts of the world an experience that’s more familiar to them.
- Some patrons, even Americans, don’t enjoy calculating the tip or don’t like feeling pressured to leave a large tip. Including suggested tip amounts on the receipt or using a point-of-sale platform that automatically calculates the tip based on the patron’s preferred percentage are two ways to reduce math anxiety. Abolishing tips altogether is another approach.
- Raising hourly rates and nixing tips gives servers more financial stability. They know that if they work X number of hours, they will bring home Y dollars. Under a traditional tipping model, they could work a busy shift with lots of high-rollers and leave with pockets full of dollars. Or they might have stingy customers who don’t tip at all. Dividing tips between front and back of house (called pooling tips) is sometimes contentious, so abolishing tips could help smooth out perceived inequalities.
- Some servers make hundreds, or even thousands, of dollars in tips during an especially busy shift. Gratuities provides an incentive for them to give customers an exceptional experience, which hopefully results in more repeat business. They won’t always get an extra large tip for especially friendly service, but the flat hourly rate model removes some of the motivation for servers to go that extra mile. Plus, talented servers may gravitate towards establishments that still offer tips since this could increase their earning potential.
- No-tipping restaurants mark up the cost of their menu items to compensate for the lack of tips. While customers may wind up paying the same amount of money under either model, they may perceive a restaurant to be higher priced if gratuity is already built into the menu prices.
Image Credit: Tim Dorr