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Will Restaurants in the Future Use Tipping Models?

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Blog April 17, 2017 by Sydney McMurter
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Will Restaurants in the Future Use Tipping Models?

Tipping in service industries has been firmly ingrained into the conscience of North Americans. It is a social expectation, however, that varies around the world. According to Business Insider, tipping is believed to have originated in 17th century Europe, where the word “tip” may have represented the acronym “to insure promptitude.” Wealthy Americans picked up the practice after traveling to Europe but it was met with some backlash due to its classist undertones. Eventually, it became mainstream in America to tip in restaurants as anti-tipping laws were repealed in 1926.

Recently, the debate around the ethics of tipping in North America has resurfaced. In this article, we look at the pros and cons of tipping, who’s experimenting with a no-tip policy, and consumer sentiment towards this trend.

Pros and Cons to Tipping

The traditional argument for tipping is that it ensures quality service and that servers can make more from tips compared to hourly wages. And yet, others argue that it is a demeaning practice, where service staff must accept unpredictable pay. Wait staff may be deterred by this unsteady income, and can be affected by factors outside their control, such as a slow kitchen. There is even research that shows service quality does not have a strong impact on tip amounts, leading waiters to attempt to turn over as many tables as they can rather than focusing on service. Tips also may encourage competitive behavior between coworkers and decrease teamwork. As well, they may be unevenly distributed among all restaurant staff, which can discourage culinary talent due to low wages.

The alternatives to tipping are to include a standard service fee on the guest’s bill or raise menu prices to accommodate for the service fee. These models treat service as part of the product, and remove decision-making and societal pressure at the end of a meal. While both of these options solve some of the problems with tipping, they also have their downsides. An added service fee may remove customers’ sense of control over the experience, and they may resent being forced to pay a specific fee when they are used to optional tipping, especially if service is poor. Furthermore, raising menu prices for an all-inclusive, transparent cost can shock customers and deter them from your restaurant.

Shifting Attitudes

In the 2016 U.S. American Express Restaurant Trade Survey, the shifting attitude around tipping was revealed (reported by CNBC). Eighteen percent of surveyed restaurant professionals have already adopted a no-tipping model, while 29 percent say they plan to move in this direction. Seventeen percent reported that they may join the movement if their competitors followed suit. Twenty-seven percent of operators said they will keep a tipping model, and 10 percent are undecided.

Consumers are also split on this issue. In a 2016 poll by Angus Reid, 40 percent of Canadians reported they prefer a “service included” system with higher base wages for restaurant employees. The majority of this group (87 percent) believed that “tips just allow employers to underpay their employees.” Forty-six percent of all respondents stated they prefer the current system with tipping as part of the restaurant experience, while thirteen percent of respondents said they had no preference.

In the same study, 61 percent of Canadian respondents believed that tipping is no longer about showing appreciation for a job well done. Only nine percent said they often deviate from the standard expected tip due to very good or very poor service, while 45 percent said they rarely or never do. Forty-six percent of customers reported that they sometimes base their tip amount on the quality of service.

Trial Period

Many restaurants are testing a change towards no tipping, which has resulted in mixed reactions. Earls restaurant in Calgary, for instance, is testing a no-tipping policy for six months (starting in summer 2016). Customer bills will include a 16 percent “hospitality charge” with no room for gratuity, which will be divided by all hourly staff to result in higher consistent wages. Craig Blize, Vice President of Operations at Earls stated that “we believe a cook who makes a burger for a guest is equally important in the experience as the server delivering the burger.” Others restaurants, such as Joe’s Crab Shack, have tried the no tipping model and been forced to go back to tips due to customer complaints and decreased business.

The Future of Tipping

So, with such a divide in opinion and changing attitudes, deciding how to move forward in the future is a difficult task for restaurant operators. Changing customer habits, no matter the industry, is always a challenge. Once the growing pains from this transition are overcome however, there are many positives to inclusive pricing without tips. Whether the status quo will remain, government regulations will enforce or restrict change, or courageous restaurants will lead the way to this alternate foodservice model, is yet to be seen.

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