Updated: Jul 1, 2019
When we started the Restaurant Owners Discussion Group three years ago, the culture of tipping was the main discussion. Service staff were set to earn a minimum wage that would double within 8 years, and Kitchen staff were in short supply, driving up their related wages. Hourly employees in both Minneapolis and St. Paul were earning Sick and Safe Time, and health insurance was either mandated or implemented as a benefit to long-term employees. Costs were rising across the board, and Owners needed to protect profits in order to afford their debts and keep their restaurants thriving.
Eliminating tips and implementing a "full service" approach to menu prices would allow Owners to manage their staffing costs internally, but it did not seem that the consuming public was ready for this change. Customers like the control that tipping gives them over rewarding service, and would likely reduce their visits to restaurants where tipping was eliminated. It was considered a "death wish," unless a majority of Owners adopted this approach.
Restaurants that had eliminated tipping and imposed a Service Charge in place of tips - instead of increasing menu prices across the board - were not faring well, anecdotally. Stories of bad service in Seattle, where the minimum wage increase had already taken place, went around the room like a sexy rumor. No one was convinced that the New York restaurants who had eliminated tips in various ways were going to hold on to this practice, that they would revert to allowing tips.
At that time, many owners looked around the room and shrugged - the psychology of charging customers the same amount they were already paying overall (menu price plus tip) in a flat fee up front was not appetizing. It was understood that this represented a culture change, the most difficult of all changes, and that the consuming public would not follow along. The idea of implementing Service Charges - a fee added to the bill in addition to the menu price, most similar to tipping - was batted around, but it also presented challenges. What was the correct amount to charge, as a percentage? Would tips also be allowed? And would that solve the problem of reduced profits?
Fast forward to now, and the minimum wage is increasing, Earned Sick and Safe Time is in practice, and health insurance costs are rising. Publicity around these changes has been limited, but Customers seem to understand what is happening.
Many restaurants have started to charge a nominal Service Charge, ranging from 3 - 5%. More are talking about it. And the backlash many worried about from Customers has not happened. The shift is taking place, and it will be aided by further publicity about the real costs of taking care of employees.
If you are a Restaurant Owner who would like to participate in our discussion group, please email me through this link. Our next discussion will take place on April 2, 2019, so reach out soon!