Thursday, August 15, 2013

This Restaurant Banned Tipping And Made More Money

Jay Porter, the founder of Linkery (previously of San Diego but currently closed to move to San Francisco), eliminated tipping in the restaurant’s second year, instead applying an automatic 18 percent charge for service to all dine-in checks. Writing in Quartz, he explains that the move brought in more money. “Our service improved, our revenue went up, and both our business and our employees made more money,” he says.

Service improved, he explains, because servers and management were aligned in working toward a single goal and because the restaurant was able to find many people who wanted to work in the new environment. He also points to research that shows that because customers rarely change tips based on service, servers are incentivized to increase quantity rather than quality and target guests who are more likely to tip higher. Even if a tip does convey displeasure with service, that information may not even make it to a manager where it might be addressed.

Other restaurants have made a similar move. New York City-based Sushi Yasuda eliminated tipping recently in favor of paying employees a salary and benefits package with vacation days, sick leave, and health insurance. That differs sharply from many restaurants, where the tipped minimum wage is a mere $2.13 an hour. Other high-end New York restaurants have previously made similar changes.

Despite the justification for tipping, which is that it motivates servers to provide higher quality service, a customer’s perception of service accounts for just a percentage point or so in the variation between tips. Tipping also perpetuates racism and sexism. As Elizabeth Gunnison Dunn writes at Esquire, sexy women make bigger tips than less attractive ones, while white servers make more than their black coworkers.

And tipping is barely voluntary, given that without tips, a worker’s wages can fall below the minimum level. Many restaurants in fact use this system to pay servers less and still duck the requirement that they make up the difference if tips don’t bring servers’ pay up to minimum wage. Because of this low pay, the poverty rate among these workers is nearly triple that of the rest of the workforce and they are almost twice as likely to rely on food stamps., Inc.

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