Restaurant reaps rewards after it bans tipping

One owner says his sales jumped -- and his employees' pay rose -- after he did away with subjective gratuities.

By Aimee Picchi Aug 14, 2013 12:54PM

Tip jar (© Corbis)Tipping helps ensure a better dining experience by rewarding wait staff for attentiveness and quick service, right? 


Actually, not so much. The Linkery restaurant founder Jay Porter explains that his company disproved the industry's assumptions about tipping after he banned the practice in his second year of business.


"We instead applied a straight 18% service charge to all dining-in checks and refused to accept any further payment," Porter writes at Quartz.


That made the Linkery the first restaurant "where you couldn't pay more money than the amount we charged you." But he says instead of his waitstaff's performance lagging, "our service improved, our revenue went up, and both our business and employees made more money."


Research backs up Porter's assertion that tipping actually promotes bad service and doesn't always reward hard workers. For starters, servers who get the most tips are thin white women in their 30s with large breasts, according to research from Cornell University professor Michael Lynn.


But discrimination also swings in the other direction, Porter notes. Servers often profile guests, providing better service to those they believe will offer big tips. That creates "negative experiences for the many restaurant customers who are women, ethnic minorities, elderly or from foreign countries," he notes. 


Tipping also encourages servers to maximize the number of guests they serve, which can lower the quality of their work. 


Some top New York City restaurateurs recently discussed the issue of banning tipping via Twitter but were shot down by their own servers, Eater.com notes. That might be due to the potential for servers to haul in big tips on busy nights, but the truth is that many workers who rely on tips aren't exactly rolling in the dough. 


The median annual wage for servers is about $18,540, according to the Bureau of Labor Statistics. (While tips are taxable income, some people working in tip-based industries underreport their income, contributing to the $2 trillion shadow economy.)


To be sure, it's not as if flat service rates are unknown in restaurants. Automatic gratuities are the norm at many eateries for big parties, often charged 18% for tables of six or more. 


But a June lawsuit over the practice indicates flat-rate tips may have a tough time gaining traction. Ted Dimond, 47, is suing Darden Restaurants' (DRI) Olive Garden and Red Lobster in Time Square, among other restaurants, for adding automatic gratuities to bills. 


"They’ll have an automatic gratuity in the price and then they’ll have a line for an optional tip, but a tip and a gratuity are exactly the same thing," his attorney, Evan Spencer, told CBS Local. "They want to squeeze that extra little dollar out of everybody."


Follow Aimee Picchi on Twitter at @aimeepicchi. 


More on moneyNOW

103Comments
Aug 14, 2013 2:19PM
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I actually like the idea of no tip.  Automatic service charge? I have had great service and tipped 25% and have had such poor service that I actually had to go to the bar for a glass of water and tipped a penny. I did tell the bar tender about the poor service. How about paying workers a fair wage and forget any extra fees or tips?  I bust my butt all day every day-no tip or bonus for me.
Aug 14, 2013 2:24PM
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I usually tip 20% and that is for good, attentive service...I am not paying an automatic 18% like the article says if the service is crappy. I dine out often & many places often give crummy service or want to rush you out by bringing all the food at once (even though they were asked to space it out) so they can turn the table over to another customer. That does not warrant an 18% tip.
Aug 14, 2013 1:59PM
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There should be no "tip" figured in. The cost should be the cost--if the service is so bad that a tip wouldn't have been given, then the manager should be taking something off the bill for the inconvenience. It is stupid to do "tipping"--it is a hold-over from segregation (when most servers were black), is demeaning, and serves to make diners feel as if they are Lord and Lady Beneficient.

 

Just pay the servers minimum wage to start, and increase their salaries as they show their worth--there's no need for the stupid "tip" industry (not to mention, that will do away with the $2 trillion shadow industry).

Aug 14, 2013 2:41PM
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They obviously would rather the charge be separate so as not to make the food costs seem high. Not a fan of this really, I would rather a transparent price that includes that extra portion of the wage. On a side note, anyone catch the part about the tips not being reported as income? 2 trillion shadow economy? I though only the rich weren't paying their fair share? Look like wait staff also don't pay their "fair share" either. Ha Ha
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Just price the meals at an increased price and pay your servers a percentage of the gross bill. 

 

Example:    Hamburger: $5.00

                    18% gratuity    .90                                  Total Cost   $5.90

 

Next example:     Hamburger $5.90

                               0% gratuity and a NO Tipping clearly stated         Total cost   $5.90

 

In the "Next" example you then  give the server 15-16% of the bill ($5.90)  and there you have it.

No Tip.    No added gratuity.

 

Folks, this is not rocket science. 

Aug 14, 2013 3:46PM
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It is interesting how different experiences are. 

 A friend and I had lunch yesterday and we both tipped the water, who did and excellent job, 25% of the ticket.  My friend decided he wanted another glass of wine and asked the water to bring it. 

Since the check had already been closed out and the tip paid on those charges, my friend just gave the waiter an extra dollar when he brought the $5 glass of wine..  The waiter smarted off about "who gives a dollar tip" after already being given a $12 tip from my friend for his $45 lunch.

My friend was extremely pissed and just reached over and pick up the dollar himself and put it back in his billfold, smiled at the waiter and said "thank you".

Aug 14, 2013 1:47PM
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I won't go to a restaurant that forces me to tip 18%.  15% is more than enough.
Aug 14, 2013 3:09PM
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This is the right idea, but wrong method.Tips should not be included in the bill, anymore than utilities, food costs, or any other overhead. Employees should be paid what they deserve and the meal price should be adjusted appropriately. Why is it anyone's business what % of a bill is used to pay a waitress? Where is the line that shows how much is set aside for the cook or dishwasher?

In other words, people don't want to see your company's accounting on their bill. Just charge them what you want to charge for a meal and maybe offer a discount for carry-outs. Leave the accounting in the back office, where it belongs.  
Aug 14, 2013 2:53PM
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BS!!!  The 18% "service charge" is another word for high-end tip!  Banning tipping, means paying the price on the menu.  If they can jack their menu prices up 18% and still stay in business, then they have officially banned tipping.
Aug 14, 2013 3:29PM
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I think all of the service jobs should forget the tip... pay the help a fair market wage and if they price themselves out of service to bad others will take their place....
Aug 14, 2013 2:00PM
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Good, timely service gets a hum dinger. Poor, inattentive service gets the finger.
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I dont get tips.....

 

I sitll have to work....

 

Here is a good tip..... Dont bet on slow horses.....

Aug 14, 2013 2:45PM
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I always thought TIP was an acronym for "To Improve Performance". If so, getting a TIP implies you're a slacker.

 

I'm OK with what the restaurant has done. It makes sense to me. But, when you add a fixed TIP percentage onto the bill, aren't you really just increasing the price so you can pay your employees a decent salary?  

Aug 14, 2013 3:36PM
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The biggest problem with service in the US is the quality of the labor force.  Most Americans under 40 or so have never understood that tips were a form of incentive.  They think they deserve tips for finally getting your cold dinner to your table without dumping more than half of it on the floor and then get "pissy" when their tip actually is related to the quality of service.

I don't doubt that this restaurants staff might actually have improved their service.  However, I won't pay a server (whether directly or through the tip jar/pool) until the service has been provided.

I haven't tipped a waitress for her cup-size in the 40 years since I left high school, unless I have been "coerced" by colleagues into going to a strip club where mammories are on the menu.
Aug 14, 2013 2:50PM
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It's an antiquated system.  If I order a filet and my friend orders a salad...we get the same service but I pay considerably more for the plate to be set in front of me.  I'm not for a second undermining the job of a server...or of anyone who serves the public.  I have retail sales people who put out an amazing amount of effort to help people and get no tip.  I believe the price of your meal on the menu should be what you pay and the employer pays bonuses to his people based on performance...that used to be what tipping was about but it's turned into something less rewarding and dramatic for all concerned. In today's world where people travel globally, customs differ, and a system that works wherever you are would be fair and equitable to both those being served and the server. 
Aug 14, 2013 2:06PM
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Ha Ha Ha... add that automatic gratuity if you want to! I may be only a small percentage of the average dining populationl, but I am a great tipper for any server regardless of gender, looks, race, etc. - right up until I see the automatic gratuity on my check.

 

I tip well over the 20% rule, usually about 40-50% of the check depending on overall service and the cost of the meal. But always at the very least a respectable amount because I understand the garbage that servers and retail workers have to endure. Thankless, ungrateful management and rude customers make for a very hostile environment which is one of the many why very few stay in those professions for an entire career.

 

With all of that, once you take away my right to decide what I think an appropriate amount for a tip then I will not complain, you just saved me money! That 18% is normally well below what you would have gotten in a tip if you left the decision to me. Some establishments will remove the 18% automatic gratuity if you ask them, and then I tip the server an appropriate amount. Others will not, and then I just let that server know that their managements policy just cost them money. Also, if that gratuity is automatically added to the check then the server has no choice but to claim that measly 18% tip and pay a tax on it.

 

 

Aug 14, 2013 4:48PM
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If you call it a mandatory service charge, it's a forced tip.
Aug 14, 2013 3:05PM
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I was in the industry for over 15 years and I agree with this initiative. I have witnessed the customer profiling first hand and also the bad tipping from lower income customers and foreign nationals as well. This would end both. I am not sure I agree with the refusal to accept extra but I can see the thought behind it. One thing I do say is the service better be top notch or you will get the cheapo complainers whining to get the tip removed left and right.
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I have no problem if there is auto-gratuity added assuming that the money is added to the servers paycheck and not cashed out nightly.  They should pay taxes like everyone else.  I have a girlfriend who served at a hot spot in town.  She said she paid taxes on about 10% of her tips roughly.  She always had money and I was struggling to get by with my entry level job in IT.
Aug 14, 2013 2:37PM
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I can see this working as the server is tied to the sale and the longer the person stays and continues to spend money the server is making money, and it doesn't matter who they are because the server still gets theirs.
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