Skip the tip, restaurant CEO says

Noodles & Co. boss Kevin Reddy says he doesn't want diners to feel pressure. It helps that he pays workers more than minimum wage.

By MSN Money Partner Mar 19, 2014 1:32PM
Image: Tip (© Corbis/SuperStock)By Katie Little, CNBC

No need for your internal Emily Post to debate the merits of 15 percent or 18 percent here. At Noodles & Co. (NDLS), the recommended tip is nothing.


"Respect doesn't cost you anything," Noodles CEO and Chairman Kevin Reddy said in an interview. "Being nice doesn't cost you anything, and we don't really feel that folks should have to pay something additional for us to appreciate that they're choosing us over another restaurant."


The no-tipping policy also plays into an emphasis on relative value at Noodles, which has about 380 locations in 29 states and Washington, D.C., that serve a variety of noodle and pasta dishes, he added. The average meal sets diners back about $8 -- a price tag that's higher than those of fast-food giants like McDonald's (MCD) or Wendy's (WEN) but lower than those of casual dining chains like Darden Restaurants' (DRI) Olive Garden or DineEquity's (DIN) Applebee's.


"We don't want our guests to feel we're trying to upsell them," Reddy added. "We'd rather have them feel we'd rather upserve them than upsell them. That's why we're really cautious even about the price increases we pass on."


Reddy stressed that the recommended policy isn't about denying team members tips since the policy means that Noodles must pay workers enough to make sure that it's not an issue. (He also mentioned that some customers insist on tipping despite the policy, which workers will then accept.)


While the company did not share payroll data, Noodles mostly pays workers above minimum wage, Reddy said. Since its pay is generally higher, potential hikes in the minimum wage rate won't affect the business too much, he added.


In recent months, the federal minimum wage has been a hot-button issue. Last month, President Barack Obama boosted the minimum pay for federal contractors hired in the future to $10.10 per hour. He's also voiced his support for the federal level for all workers to rise to $10.10 from the current $7.25. Separately, organized protests of fast food workers have lobbied for a jump to $15.


If minimum wage rose much higher than expected, the move could reset expectations across the industry, Reddy said.


Although he said he supports the idea of trying to pay people fairly, he doesn't think there's an easy answer to the minimum wage debate.


"I'm not opposed to things that help folks, but I'm also very pragmatic and I'm frustrated at times that good intentions don't get executed well and that there is waste in our government," he said. "So to me, I think as a society we should help people and set up a system where people can be successful and have high self-esteem."


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1132Comments
Mar 19, 2014 1:56PM
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The whole concept of tipping is ridiculous.  Business owners should raise salaries by 20%, raise prices by 20%, and not allow tipping.  That way all customers pay the same amount, and all servers earn the same amount.  Why should a server make more money when a customer orders a $25 steak (earning a $5 tip) instead of when a customer orders a $15 chicken entree (earning a $3 tip)?  The server's work is the exact same in both scenarios.  And why should I pay more for my dinner than the person next to me, because I leave a 20% - 22% tip while the person next to me only leaves a 12% - 15% tip.  Also, way too many people are expecting to be tipped nowadays.  When I get my hair cut I can understand tipping the individual stylist, but when the owner of the establishment cuts my hair I'm supposed to tip her too?  It makes no sense.  Tipping was only supposed to be for restaurant workers who earn less than minimum wage.  Now many people who earn much more than minimum wage are expecting tips too, and that's not what the concept of tipping was supposed to be about.

 

That's my two cents worth.  Or three cents, with the tip.

Mar 19, 2014 2:35PM
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I never could understand why a customer should have to pay for good service and not thier employer.

Mar 19, 2014 2:39PM
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It's more of a fast food style restaurant. If I sat down at Noodles and Co, they took my order, got my drinks and checked on me I would tip. All the cashier is doing is taking my order and giving me a number. A cashier is not a waiter/waitress. Why would anyone tip for that?
I guess I could see tipping the food runner a few bucks, if anything. They are doing all the running around. 
Mar 19, 2014 3:01PM
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I want to know how McDonald workers figure they should get $15 an hour? Most are kids and  some adults,most of which give the worst service I have ever seen! I am all for getting paid what you deserve--how can fast food workers feel they deserve that much?
Mar 19, 2014 2:42PM
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Here's how I feel about tipping: if tipping in restaurants were abolished, servers would be paid more and the price of food would go up to compensate for that. So either way, the consumer will be paying that extra 20%. Why not keeping tipping in practice? It gives servers an incentive to do a good job. Without tipping, servers would be paid the same amount of money no matter how good or bad they are at their job. I say this as a former waitress, by the way. 
Mar 19, 2014 2:56PM
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Tipping encourages good service. If I have a great waitress/waiter I will tip them good.

If they are no good they get very little.

Kind of like working. If you work hard and are smart maybe you'll get paid more than the mindless sloth.

Mar 19, 2014 2:56PM
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This CEO's comments are easily twisted.  Few people tip at these newer casual dining restaurants like noodles (order up front, get your drinks and post a number on your table.)  Its not full service and it doesn't feel like full service...  This is simple: Give me full service, I will leave you a tip, just bring me my food and nothing else = no tip.
Mar 19, 2014 2:07PM
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I'd like to know how his servers' earnings stack up compared to when they were getting tips.   I agree with Flaming Liberal that it's not fair to be compensated based on the price of your entree but the math is fuzzy.  A 20% raise on a $10 hourly wage is $12.00 an hour no matter how many meals you serve.  A server making $2.10 an hour plus tips for 5 tables in an hour ordering conservatively $100 of food per table at 20% tip per table (5 x $20 in tips) = $102.10 for that hour.  The server on the "tips" plan could work 1 hour and make more than his $12.00-an-hour counterpart does in 8.  If it were me, I'd go for tips. 
Mar 19, 2014 2:37PM
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Why one one tip there anyway ! It is not a full service establishment !!
Mar 19, 2014 3:22PM
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Well if it goes up to 15 dollars than i will leave my banking job to flip hamburgers
Mar 19, 2014 2:02PM
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Most restaurants only pay about half of minimum wage because of tips. At most upscale restaurants in NYC, Chicago and LA they pay no wage at all and servers are paid only in tips. This company seems it is taking care of its workers and paying above the minimum as a matter of company policy. So I am curious as to why you think he is "full of ****". 
Mar 19, 2014 3:04PM
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I work in a tipping industry. Tips are considered a gratuity. A gratuity is a token of gratitude. NOT REQUIRED! I want to earn tips because it let's me know my customers are pleased with the service I provided. This guy said he discourages tipping, he didn't say he banned tipping. His employees are still allowed to take a tip if the customer insists. Not a bad deal... A good wage and possible tips. I myself tip based on service. I like to tip good but if the server is lacking then it reflects in the tip. As far as fast food workers go, that's just going too far. Mc Donald's, Burger King, Wendy's, even Subway All put out a tip cup now. That's just begging!!! I tip in restaurants, hair stylist, the pizza guy, and the paper boy. In Vegas I tip all of the above including bell hop, bartender, and most importantly THE DEALER. The dealer spends the most time with you on a personal level. You are in the dealers face longer than anyone else's. The dealer entertains you (or they should), coaches you, and TOLERATES YOU WHEN YOU'RE DRUNK!

Mar 19, 2014 1:55PM
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Just a comment based on resturants in Australia, which also pay decent wages and discourage tipping.

 

the comment, either the aussie's are just way laid back naturally, or the lack of tipping for good service results in many slow seemingly uncaring wait staff.

 

the law of unintended consequences is always in play.

Mar 19, 2014 2:41PM
Mar 19, 2014 2:30PM
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They can't really say the restaurant owners are not making money.  For a glass of Coke many places in the Northeast charge $3.00 with a free refill...I can buy a 2 liter bottle for about a $1.00 on sale & get about 10 glasses out of it...Keep in mind if i can get it for a dollar a restaurant buying in large lots gets it even cheaper.  The same holds true for beer $5-$6 a bottle & i can buy a dozen bottles of Heineken for about $13.  Mixed drinks can go from $6-$9 with just a trace of alcohol in them.  Chicken or Veal dishes on the menu for $20 (for 2 pieces) & you can get a package of 4-6 breasts for about $5.  You can see from just a few items the restaurant is doing ok & we all know they are paying a lot less for materials since they are buying in bulk. 
Mar 19, 2014 2:54PM
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I think tips are just expected these days...  heck you can't even get food to go at a restaurant without them expecting a tip. The customer service nowadays is also poor at 95% of the places I go. If I tipped how I thought the food and help actually was... well then you guys would be calling me a cheap skate... however, not matter the service or the food I always tip 20% because I too at one time was a waitress, but I was actually nice and cared what the customers thought back then.
Mar 19, 2014 2:44PM
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Tipping is just a simple "thank you" for your service the better the service & personality (and not smothering me while enjoying my meal) the better the tip & the reverse like wise for not such good service. Its a personal preference, not a obligation. 
Mar 19, 2014 2:57PM
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I really don't understand people's gripe in tipping. It's a known added service. You get to be lazy and brought everything. People waiting tables (the good ones) are salesmen. They sale you on product. Most sales folks receive added commission for doing a good job. Why should a waiter be any different? If you don't want to tip, then go to Burger King and you won't have to. 
Mar 19, 2014 2:47PM
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As a part-time waitress who strives to give the best service possible, I would like to thank MSN/Mr. Reddy.  Thanks for putting out there the idea that tips are not necesary.  YOU may pay your employees more than minimum wage, but is it really a living wage?  Also, NOT ALL establishments have the same practice.  There are plenty of people who will read this and assume it's not encouraged ANYWHERE to tip.  I can tell you that the tips I received are greatly appreciated and make me strive to perform even better the next go-round.  For those rude-nicks that DON'T tip me and act like they just scraped me from the bottom of their shoe, they still receive good service, but it's not top notch.  Why should it be?
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This story is based on one CEO.  What do the other hundreds of thousands recommend?  Most people working for tips are either very good wait staff or not good at all.  Which one continues to be a wait staff member?
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