Who Owns the Tip?

What is the purpose behind the tip at a restaurant? Is it the friendly attitude and ‘can-I-help-you’ demeanor of the waiter or waitress? Does it depend on how long it took to cook that “extra anchovy” pizza? Is the food quality the reason, or is it all decorum and timing?

I guess everyone has an imaginary sliding scale in their head on what determines a fair tip. Since the service is what I notice first, I tend to weigh it higher than food quality. Everyone is different though. 

The one thing most people know about the restaurant business is that competition is fierce. That Korean BBQ place you like might go belly up in a few years, that local deli with the perfect Ruben might be close to bankruptcy. Even profitable ones are often one slow season from shutting the doors forever. The reasons are pretty simple. Alternatives exist and even most small cities have a handful of options for dinning out. From steak houses to Applebees and everything in between, this country is chock full of places to gorge. Owners decide daily on how to cut costs and remain profitable. One measure is in salary for employees whether wait staff, cooks or bus workers. Retaining good cooks, especially at swanky places, is imperative for offering top quality. With such tight profit margins owners are sometimes forced to use tip pooling schemes to pad the salaries of everyone.

Understandably this doesn’t sit well with servers. At least in those cases where they are used to tips as a part of their income, a ‘pooling’ requirement would undercut their totals. Currently the Department of Labor is considering tossing out the Obama era’s policy that make’s pooling illegal. The existing law bars restaurant owners from using server tips as a means to pay cooks, bartenders and bus boys for their labor. President Trump’s proposal would overturn that requirement, giving owners total control over payroll. At its core, this law gives owners the freedom to make choices in the best interest of their businesses.

 Without the freedom to make payroll choices though restaurants may find themselves quickly out of business. The best option for any company trying to survive is to make choices that fit their model and make sure everyone working there understands it.

Some businesses get around the pooling law by adding a percentage fee (10%) to the total bill after the sales tax. That way half the tip (assuming a 20% gratuity) is already spoken for. It usually gets added to a salary fund and divided among the ‘back of the room’ staff like cooks. This does seem a bit like taking money from the servers, but again it depends on what the tip represents. Is it a reward for excellent service, or payment for a great meal and wonderful experience? If the former, than steeling the server’s income is what it feels like. If the latter, than the staff shares in the reward due to everyone.

I think the old model of servers getting the whole portion of the tip is on the way out, probably has been for a while. I never think to ask when eating out “How exactly is my tip being spent?” but most establishments have probably figured out what works best for them by now. I imagine if too many dine in places go the pooling route, good wait service will see a huge drop off. That’s the downside. Removing the incentive for great service means removing great service. There is some question as to how much of a link there is between customer care and tip percentage. Most people put down between 15% and 20% for even mediocre service; Acting ‘extra nice’ to paying customers doesn’t seem to garner a higher percentage.

I don’t want to live in a country that doesn’t prize customer service though.

 US companies generally prize customer service, this is especially true for dinning out. I went to Ireland a few years ago and ate nearly every meal out, some at fast food short order places and some at proper dining restaurants. In the short week I was there I noticed that places used to hosting foreigners had decent to good service. One place even cooked for us after the kitchen had closed from catering an all-day wedding. The burger and fry joints were universally bad though, the service was worse than an 8 hour license check at the DMV. Slow moving workers, forgetful cashiers and bland (really bland) food were the norm. “For the love of taste, has anyone ever heard of seasoning salt!?”

The best incentive in customer service is money. I like a culture that emphasizes taking care of paying customers. We shouldn’t take away that importance altogether even if it means the dinning business has to rethink some core methods for paying its help.

FirstPrinciples believes a one size fits all approach to paying workers is bad business and hurts those with a unique model and a varied customer base. Let enterprising owners decide how to hire and pay their own staff according to the model best suited. Who can say what creative marketing ploy they might devise anyway to attract hungry diners. If tipping wait staff for excellent service is what customers want, use it as a selling point for your new venture. “Waiters get to take home any extra tips” as a model, might just work for a large enough segment of your city’s foodies. It would certainly attract good servers eager to earn higher rates than the competition.

For exactly the same reasons I was against the smoking ban for restaurants over twenty years ago. Some places cater to smokers. It seemed silly to insist they all ban it. Don’t like working in a smoke filled dinner? Don’t. You don’t like eating in a restaurant with a smoking section? Don’t. There were plenty of places going smoke free before the ‘ban’. Let owners decide which (smoking or non) is a better fit.

Putting one size fits all regulations on company restricts their ability to compete. Put choice before out dated requirements.